The unraveling process underway around the world right now is accompanied by a flood of easy answers and easier solutions. Some are ludicrous: Enter ‘Mr. Spend’”
“The economics is really easy,” says Mr. Spend. So is everything else: head-slapping ‘why didn’t I think of that’ easy. Mr. Spend’s words flow like water along with recycled ideas from his computer keyboard: easy because spending itself is a form of genius.
Why haven’t we thought of these incredible spending solutions before? Of course they have been: this country is the United States of Spend: we have been running incredible exponentially expanding loan ‘balances’ since 1492, when Chris Colon borrowed from Italian moneylenders and the King of Spain in order to discover the place!
In 1938 the Germans decided Czechoslovakia would be a nice addition to the decor and the British and French governments reluctantly agreed: since then the US private- and public sectors have spent (borrowed) over $55 trillion! Additional amounts on the order of hundreds of trillions have been pledged. Most of this $55 trillion has been spent (borrowed) during the past thirty years, an increasing part of it to service and retire older debts. Don’t be fooled: the US was born out of British debt and the industrial revolution. Ours is a government for, by and about debt: without it and the associated spending there would be no United States of Anything … only deer, coyotes and ‘poor people’.
Because industrial modernity cannot pay for itself it is necessary to borrow and borrow some more: the gigantic debts are themselves evidence to modernity’s productive incapacity. We make junk, it is worthless junk, it cannot pay for itself. We are living the end of the age of spend, the end of the age of living beyond our means, the end of easy ideas (wishful thinking) cloaked in torrents of easy words (lies).
The avatars of easy are the current generation’s thought leaders. This is a revolutionary term that suggests thought followers and intellectual captivity. The axle around which the entire enterprise revolves is how little we will have to pay for the changes we are being forced to make by circumstances we have created for ourselves.
“If we were to spend more money at the government level and … rehire the schoolteachers, firefighters, police officers who have been laid off in the last several years because of cutbacks at the state and local level, we would be a long way back towards full employment. …,”
Mr. Spend’s ipso-facto moment: when workers are hired back there is indeed less unemployment. What next? Mr. Spend is a highly-regarded public thought leader with an impressive curriculum vitae and prominence within the establishment. Books and articles spew forth from Mr. Spend like affection from a lap-dancer at a strip club. What is offered is the easy idea that we must indulge ourselves more in the shops, real estate offices and car dealerships across this great land: if we cannot- or are unwilling to do so ourselves then the government must do so in our place.
Easiness is the natural outgrowth of the academic process and fake moral supremacy that accompanies it. Ideas are diverted from the conventional main stream by company-appointed ‘geniuses’ and shills into media tributaries without any critical effort being made to understand what the ideas really mean or whether they are germane.
What escapes Mr. Spend’s analysis is the entirety of the enterprise that contains spending; the chain of which government spending is but one modest link. He ignores what has been spent already. He offers little understanding why there is so little current spending and demand in the first place. He blithely assumes for all of us that our current conditions are identical to those in America in 1932 when they are not. Dr. Spend claims to speak in the mind of John Maynard Keynes, yet it is hard to imagine the witty and insightful Keynes ignoring fundamental differences between our current state of affairs and that of the past. All finance crises are unique. In the intervening 80 years we have made ourselves over as industrialized beings, our food, shelter and clothes are industrial products, our entire way of living requires concentrated, complex trans-national structures that are all credit- and petroleum fuel dependencies. It is this centralized industrial system itself that has failed, not the willingness of individuals and entities to engage it.
Keynes would recognize the overall failure at once, Mr. Spend is still looking.
As it is, understanding the grand failure and its implication is hard on all levels. After the understanding comes the policy changes at all levels that are much harder and more expensive. By offering helpings of easy as a solution, Mr. Spend strands himself.
How hard? Our world must live within its resource means. No person alive has ever done so, no modern country has never done so. In America, citizens must borrow to survive: to eat, to put clothes on their backs. Millions of Americans are incapable of borrowing because lenders refuse or borrowers are unwilling- or unable to take on more debts. We cannot pay our own way as individuals or earn out of our own efforts, we cannot live within the ‘solar energy budget’ because we don’t know how. Industrial development as an economic force emerged in the 16th century, it quickly cannibalized competing pre-industrial regimes. Nobody can remember back that far: living within our means is a lost art like plastering.
Mr. Spend reaches far beyond what is needed to survive, to revive the entire waste-based enterprise as if such a thing is possible. America and the rest of the world does not have a shortage of goods. Instead, there is a shortage of the resources necessary for these goods to function including credit needed to purchase them. Rather than analyzing why finance refuses to lend, Mr. Spend simply paints lenders and their servants as demons and demands that government substitute its credit in finance’s place. Here is spending in the face of entropy: the increase of goods amplifies the demand for resources, the cost of the resources is greater than what the goods themselves are worth. More spending is counterproductive.
Here is the easy side of easy:
Amory Lovins tells us how painlessly we can shift from the current stumbling energy-waste infrastructure to a new version that presumably stops wasting altogether. Just make some carbon-fiber cars and let slip the dogs of efficiency!
Otherwise, there is no point to making the shift, right?
Lovins use all the hip buzzphrases. He’s like a character in a Scott Adams ‘Dilbert’ cartoon: “deeply disruptive business opportunities”, “congested business logic”, “competitive advantage”, “integrated innovation” and plain old garden-variety “innovation”. Certainly his listening audience of tech wannabes are deeply impressed by the ease with which Mr. Lovins dispatches our current energy catastrophe. Why not? The kids are looking for some linked innovations to turn into stock market fortunes for themselves.
Meanwhile, outside of TED-ville, the current energy/resource waste paradigm is currently annihilating Spain and whatever competitive advantage its hapless citizens might possess. For an IPO to somewhat- succeed in 2012, an entire nation must die.
None of the easy solutions and easy analysis are offered with real-world evidence of anything other than trivial diminished marginal expenses for some big businesses. Lovins’ adjustments at the edges of our colossal enterprise cannot do anything more than add to resource demand, he is another version of Mr. Spend.
Easy analysis uses the easy ideas forms ready-made ‘hope’ and ‘optimism’ that are commodities that can be handed out like life preservers on the boat deck of the Titanic.
The Energy Revolution on Our Doorstep
By The Mad Hedge Fund Trader
A major plank in my golden age scenario for the 2020’s is the collapse of the cost of energy. This won’t occur because of a single big discovery, but from a 1,000 small ones that aggregate together to create a leveraged effect. The upshot is that we may be free of OPEC in 3-5 years, and completely energy independent not long after that. The impact on financial markets and global standards of living will be huge.
To flesh out my arguments, I called Dr. Amory B. Lovins, chief scientist of the Rocky Mountain Institute, who spends a lot of time thinking about these things. He says that our current energy addiction makes us dig up about four cubic miles of primordial swamp goo to burn each year. That costs the US about $2 billion a day, and another $4 billion a day when the cost of defending unstable supplies in the Middle East is thrown in.
Some 75% of the electricity generated powers buildings, three fourths of the oil fuels transportation, and the rest goes to industry. Demand for Texas tea is already falling dramatically. Since 1975, the amount of oil needed to produce a dollar of GDP has plunged a stunning 60%. Coal production peaked in 2005 and has since lost 25% of the market for power utilities, mostly to natural gas. “Peak oil” is becoming a reality, not in supply terms, but in demand.
This is only the beginning of a major long term trend that still has decades to run. Obama’s move to raise mileage on US made cars from 25 to 55 miles per gallon by 2025 will have a crucial impact. While in the past Detroit lawyered up and fought such policies tooth and nail, now it is reengineering to achieve this ambitious goal. GM says it will offer a hydrogen fuel cell powered subcompact in five years for $35,000. Some two thirds of fuel consumption is caused by weight, so the adoption of cheap ultra-strong carbon fiber composite technology from the aircraft industry, which offers five times the strength of steel at a tenth of the weight, will give them a major advantage. BMW, Volkswagen, and Audi all plan to bring such vehicles to the market in 2013.
It is simply assumed as a condition that humans will always own and operate cars … just as they are assumed to breathe. BMW, Volkswagen and Audi will bring advanced lightweight vehicles to the market: who will bring customers to these firms with money? It is assumed that somehow the buildings, generating stations and hydrogen-powered GM cars will pay for themselves by way of their use, something their non-tech cousins are unable to do. Finance has stopped lending because nobody/nothing can repay anything: we’re all Greeks now.
Here is another thought-leader, leisure and entertainment promoter Peter Diamandis:
Diamandis wants to go into space. We’re already there! Diamandis’ theme is more easy borrowing and gigantic public spending subsidies. Here is the march of the thought leaders straight out the air lock, over the edge of the cliff:
Diamandis is the insane Dr. Mercer with a killer app. Mercer’s ‘inevitable’ is a golem that is too big- or too dumb to fail even when cut to pieces, like Citigroup or wish-think supply side economics. What does Diamandis’ hand-held supercomputer/cell phone promise for the future? You really don’t want to know: cell phone battles in the streets with zero-point disintegration rays over a few moldy packages of Velveeta cheese.
Electronic Arts gives us a slimmed-down version of cannibal capitalism in six-point four nine minutes! Go to the e-store and spend ‘credits’ then battle as long as your ‘lives’ and health-care-in-a-can hold out. As in our flesh-and-blood world, success is an evanescent concept: a product without substance, numbers on a screen expanding exponentially according to Moore’s Law. Meanwhile, death is a gory certitude: it lurks behind/within every automatic door, ready to spring out of every hand-held supercomputer cell phone with a zero-point disintegration ray.
Of course, Diamandis and the rest of the Spend clones cannot help themselves. They are pop art characters, big-business versions of Joe Dallesandro. All of them are hapless shills in the technology Ponzi scheme. They put on the ‘entrepreneur’ makeup and read off the script. The process encourages the funds to flow toward the industries that make up the pyramid and thence into the pockets of the real entrepreneurs.
Warhol still makes the rules: pop-politics has repainted the thieves’ trade of amassing fortunes into a civic virtue: entrepreneurs borrow their fortunes, the resulting debts are paid by others. Pop-economics insists the racketeering is the creative equivalent of the work of our Renaissance betters. What the pop art itself illuminates by way of its own content is a collective future as a nightmarish, long-night’s pilgrimage through some cosmic digestive tract into the toilet. Most of us aren’t going to make it. Here is Gregor again with Paul Gilding:
Gilding’s view is that we’ve reached a relationship between global population and available natural resources, that makes it inevitable that the economy—a converter of natural resources into goods—will sharply slow down, if it has not started to slow down already. Gilding can be thought of not as a neo-Malthusian, or a doomer, but rather as an ecological economist. (As most readers know, I share this same view.) Gilding looks at trailing historical growth rates — again, the rate at which natural resources are converted to industrial and population growth — and concludes that the future size of the economy at these growth rates would create a machine that the earth simply cannot sustain. Again, I agree.
Here is where we run aground and stay there. We tell ourselves that, “the economy — a converter of natural resources into goods — “. We convince ourselves that we have something(s) to lose, that the pink slime excreted from our factories represents value. The more this is demonstrated to be false the harder we try to prove the lie with the help of our technology.
Meanwhile, the soothing avatars of consumer technology assure us that the future will fend quite nicely with carbon-fiber fenders and trunk lids. Thought leaders tell us to go back to sleep. They are quick to reassure us that there are low-cost exits from our closing circle of self-assembled monsters. EA tells us we can scrounge up ammunition to reach the end of the next corridor provided we are lucky enough to find it and can survive long enough. We yearn to believe the TED people but must ignore their ‘goods’ have gotten us into our fine mess in the first place.
Solutions are more of the same old problem with new coats of paint. We don’t need smarter phones because we have nothing to say. On the way to phone heaven, anything faintly resembling meaning has been strip-mined for some quick profit to another tycoon … along with everything else that might actually have value at some sort of basic, human level. TED tells us without mouthing the words we need more tycoons, and that tycoons-in-waiting are available at the TED when the time comes to hire them.
We refuse to accept that wealth is the problem rather than the solution. We want wealth for ourselves, the chance of wealth for another lucky winner being another industrial ‘good’ that can be sold at the e-store. Wealth by way of clever thievery is no different from wealth by not-so-clever thievery. TED insists the cleverness matters, that the thievery is a condition. In doing so the thought leaders offer nothing more than Mr. Spend bouncing off the walls within an abandoned space ship.